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Plan would shift bond, override cost onto homeowners

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The Arizona Daily Star

Friday, June 12, 2009

Rhonda Bodfield

Homeowners could be on the hook for a larger portion of taxes to pay for city, county and school district bonds and overrides if the governor goes along with a provision in the budget just approved by the Legislature.

For any election after June 30, the bill essentially cuts the ratio at which businesses are assessed to pay off those voter-approved obligations, from 22 percent to 10 percent — the same ratio at which homes are now evaluated.

The policy shift essentially upends one of the basic tenets of Arizona's tax policy: that businesses shoulder more funding responsibilities than homeowners because they make money off their properties. It was slipped into the budget package as a floor amendment with no public hearing and was given no mention in public bill summaries.

It will leave municipalities and school districts with two choices: Force homeowners to pick up a bigger share of the cost of any new funding or else scale back on requests to avoid having to raise homeowner taxes to compensate for the reduced business assessments.

"If you're going to make the most significant change in taxing policy for school districts in the past few decades, shouldn't you at least have a public meeting so that people can have a chance to testify?" asked Chuck Essigs, a lobbyist with the Arizona Association of School Business Officials.

He said a change of this magnitude should go to the voters.

"I would love to be campaigning against a proposal that says: 'You'll be paying more in property taxes so that businesses can pay less.' "

Municipalities already are up in arms about other portions of the proposed budget that cut approximately $42 million from the cities' share of the vehicle- license tax and place a three-year moratorium on impact fees.

They also have expressed concerns that the move might increase interest rates because of the potential for lower revenues.

Then there's the accounting nightmare that could arise from having to keep separate calculations on new bonds and those that already exist and will still take decades to pay off.

But on the larger policy issue, Pima County Administrator Chuck Huckelberry said the result would be that the Canadian owners of the proposed Rosemont mine or the owners of Wal-Mart would get a break.

"It shifts costs that are presently incurred by businesses — many with corporate, out-of-town owners — to our local homeowners. We don't think much of that concept."

Business lobbyists, who have long complained that voters approve large increases for schools and then hand the larger part of the bill to companies, said the change is needed.

"In no small way, our property-tax system is a job-killer," said Kevin McCarthy, president of the Arizona Tax Research Association. "It's the equivalent of putting a stop sign at the state border saying, 'You don't want to come here.' "

McCarthy said the bill will give voters more information about the true costs of additional spending. He said he couldn't understand why education advocates would be opposed, noting that educators have been at the Capitol all session arguing that voters support a larger investment in public education.

"If I believe what the schools are saying, which is that taxpayers are anxious to pay more money to support schools, then I have to take them at their word that people are anxious to do that. If they're saying the only way they can get support for what they're selling is in a subsidized environment, I wouldn't want to be in their shoes making that argument."

Senate President Bob Burns, a Peoria Republican, said in an e-mail that the law also includes expanded bonding and override capacity. And, he said, the single assessment ratio will improve "transparency and accountability" in the property-tax system and boost the prospects for economic development in Arizona.

But the measure could introduce a new wrinkle into the debate about whether Tucson's largest school district should ask voters for more money in a November override election. The Tucson Unified School District lost an override attempt in 2004 and another last November, and some supporters are concerned that such a change would make any new appeal even more difficult because homeowners would have to pick up more of the tab.

"It would make it a lot harder," said Essigs, the lobbyist for school business officials. "If people before were unwilling to vote for the increase under the existing system, it's ludicrous to think they'd be willing to pay even more for the same benefit."

An earlier analysis showed that the average Tucson homeowner, with a house worth roughly $178,000, would pay an additional $72 a year in taxes if TUSD asks for funding for technology improvements along with all-day kindergarten. A business worth about $450,000 would see a tax increase of about $423 annually, or $35 a month.

TUSD officials could not immediately calculate the impact of the proposed change, but the Phoenix bond-underwriting firm Stone & Youngberg did some calculations of districts across the state. According to Judy Richardson, the firm's vice president, the increase to homeowners in TUSD, as well as the Marana and Amphitheater districts, all would hover around 20 percent, with Vail following at 15 percent and Catalina Foothills at 9 percent.

The worst off — Wilson Elementary School District, which includes Phoenix Sky Harbor International Airport, would see a shift of 105 percent.

Mary Belle McCorkle, a former TUSD board member and an ardent supporter of the last override attempt, said she was concerned by the proposal, despite a recent survey showing 60 percent of likely voters support the override to some degree.

Voters first want to know what's in the measure, she said, "but the next question is, 'What will it cost me?' Right now, I'm able to say it's a hamburger a month. I think now, with this economy, people are looking more and more at that question."

Vicki Balentine, the superintendent for Amphitheater Public Schools, said she's likewise concerned. Her district is asking voters in November to renew an existing $8 million override.

Glenn Hamer, the president of the Arizona Chamber of Commerce and Industry, said such concerns are misplaced. Voters will still invest in requests that have merit, he said. And, he added, educators should actually support that change.

"Everyone knows that the faster we can get Arizona's job machine going again, the earlier we can get back into a situation where our budgets are healthy," he said. "It's when we're losing jobs and the tax base is contracting that we can get into a vicious cycle."

Gov. Jan Brewer already has said she'll veto the budget when she gets it, but opponents of the package are warily watching to see how the override provision will fare in negotiations. Paul Senseman, Brewer's spokesman, said only that she "has concerns" about that provision and was looking forward to working out a stronger package with lawmakers.